Officer at AutoStore. I'm so happy to see so many people here in the audience at the London Stock Exchange, and very warm welcome to those of you on the webcast. I know there are many of you. We have prepared a three-hour-long program for you today, where our executive management team will bring you up to date on our growth strategy and financial ambitions. Before we dive deep into our program, I'm actually required to inform you about the London Stock Exchange's evacuation routines. Can I please ask you all to just familiarize yourselves with the information here? You can also find it in your slide deck. Now, let's move on to today's program. We have prepared two sessions for you.
The first session is approximately 90 minutes long, and it will start with the opening remarks by our CEO and president, Karl Johan Lier. We will give you a deep dive into our enormous market opportunity. We're also so lucky to have a guest speaker with us today, one of our most innovative customers within the grocery segment, Rohlik Group. We will then speak about the micro-fulfillment center revolution, and finally, how R&D and innovation play an important role for our future growth. We'll open up for a Q&A session, which will be followed by a short break. Session two, there we go, is approximately 80 minutes long, and it includes IP and patent strategy, our go-to market model, how we manage supply chain efficiently, and of course, also a run through our financials.
We know that you may have many questions, so in the second session, we have two Q&A sessions prepared, rather allocated. We'll end of the day with a wrap-up by our CEO and President, Karl Johan, before we welcome you for some refreshments and mingle outside. You will have time to continue chatting with our executive management team later on as well. Without any further ado, I would like to welcome our CEO and President, Karl Johan Lier.
Thank you, Hiva. Welcome and thanks for spending the time with us today. The management team and I are very happy to host our first Capital Market Day. We will talk about our business and strong heritage, business growth and opportunities, and about our strong financial profile. My name is Karl Johan Lier. I'm the CEO and president of AutoStore. I have been through the whole growth story with AutoStore. Started as a CEO in 2008 when we were five to six people working partly with the system, and I'm excited to see that we're still on the beginning of our growth journey. I'm more positive to the future than ever. Over to our some words about our history and vision. The AutoStore idea came in the mid-1990s.
Our technical director, at that time, Ingvar Hognaland, came in one morning and said that he had an idea. The question he had was, "What do you see most of in a warehouse?" The answer to that is what you see most of in a warehouse is air. Ingvar's conclusion was clear: we need to get rid of the air. The idea was the cube with no air between the bins, and we saw the potential in the idea and started to work on a prototype. The first prototype was in operation in 2002. We decided to commercialize AutoStore in 2004. The first commercial installation was in 2005, we decided to go international with the product in 2009.
From 2010 onwards, we have a strong growth, approximately 50% growth per year. In 2016, EQT bought the company from the owner, Hatteland. In 2019, Thomas H. Lee Partners bought the company from EQT. Last spring, SoftBank invested a 40% strategic stake in AutoStore, and as you all know, we listed on the Oslo Stock Exchange in the fall. At AutoStore, we have a clear vision that drives us. It is very important that our employees understand this vision and what this means to be part of the AutoStore family. We have designed a software-enabled modular solution with unmatched flexibility that redefines space and covers all needs of the market. Not only have we redefined warehouse operation, we are now starting to redefine retail and automate all global commerce.
Our numbers are the result of more than 20 years of hard work, and we have now sold just about 940 installations in more than 40 countries, which equals approximately 35,000 robots. We have a real scaled global platform with a strong blue-chip customer base and a large network of distribution partners. We operate with a very lean business model where we sell via a network of more than 20 partners, which together represents more than 2,000 sales representatives. To date, we have sold to more than 600 end customers, where roughly 70% have an exposure to e-commerce. We have a superior financial profile with high growth, on average, approximately 50% CAGR since 2010. Last year, we grew 80%. We have high margins.
Historically, EBITDA margins of approximately 50%, and high cash conversion above 80%. The EBITDA margin is more under pressure due to the supply chain situation at the moment. We have already taken actions to mitigate this and expect margins to be back at historical levels at the start of 2023. AutoStore is also an investment into global megatrends. Significant growth in e-commerce is shaping the industry and the requirements for fulfillment solutions. Approximately 70% of our customers today are involved into e-commerce, and long term, we expect e-commerce to continue to fuel our growth. As we know, e-commerce has not seen the same strong trend in recent quarters as lockdown restrictions from the pandemic are being lifted.
We are of the opinion that this is temporary and that underlying trend and e-commerce will continue to fuel our growth in the future. As a result of this, we see a growing demand for fulfillment centers in urban areas capable of supporting same-day delivery and explosive growth in demand for MFCs. Our Global Head of Retail, Mike Demko, will talk more about the exciting opportunities we see in this space later in this program. AutoStore is in a fast-growing market. Even though more and more warehouses are becoming automated, only about 15% of the market is automated today, leaving plenty of space for growth and increased demand for automation. In our view, demand for automation across the supply chain will continue to increase to enable new ways of fulfillment and reduce the dependency on manual labor.
Changing customer demands and increased focus on sustainability will also drive AutoStore's growth. As our solution's environmental footprint is much smaller than competing technologies, we are enabling our customers to reach their ESG targets. AutoStore's results are based on more than 30 years of development, leading to a second-to-none system with regards to reliability and performance. We have developed AutoStore to a level where we today have the best uptime in the industry, 99.7% measured over our customer base, and we can run large systems with 1,000 robots per grid and very high performance. The last year, we have launched many new innovations to the market, like the new Black Line robot and workstations, new software like Router and Exception Handler, and recently, we launched the R5+ robot.
We will continue to upgrade our software to meet even higher performance, and we are also working on Frozen to be able to offer several temperature zones in one grid. This will have a large impact on our ability to meet the demand in the grocery sector. Our patent portfolio is now more than 460 patents and patent applications, where 2035 is the average expiry year. We normally file one new patent application every week. We have a large and growing R&D organization, which today consists of over 160 employees, where 70% is focused on our proprietary software. We continue to enhance and develop the product to meet even higher performance in future. This topic will also be discussed further by our CPO, Carlos Fernández. We have a growing team of world-class talent.
Today, we are 710 employees in 14 countries. The largest countries are Poland, where we have a factory or assembly plant, Norway and the U.S., but we are also growing the organization in the large markets like Germany, France, U.K., Italy, Spain, Austria, Singapore, Japan and Korea. We have great focus on the working environment and maintaining our strong and unique corporate culture, which have been and is a key success factor for us. We also focus our attention on improving the working environment and labor condition at our end customer through our product that is supporting that. In AutoStore, we are lean, transparent and bold, and job satisfaction is shown in our cultural survey and our low labor turnover rate. Last cultural survey showed a net promoter score of 79%, and 91% was very satisfied with their place of work.
We have had a stable and strong supply chain for many years. In recent years, the supply chain has been under pressure, for us, primarily on aluminum and components. We have strengthened our supply chain organization and are actively sourcing components in addition to our suppliers. This year, we have gotten Israel Losada Salvador as our new COO. He has already worked with us for several months and will start 100% from June first. In addition, we have added more capacity on global sourcing and is working to set up a new factory in APAC to increase our assembly footprint. Israel Losada Salvador will go more into detail on supply chain later in this presentation. We have generally added more suppliers in the supply chain, and on aluminum, we have doubled our capacity the last 12 months and added capacity in Europe and APAC.
The goal is also to set up aluminum suppliers in North America. On components, we are actively sourcing components from several sources, and if needed, we are also redesigning components and increasing inventory to secure supply. At present, we are comfortable in our ability to source components to deliver our guidance for 2022. In order to tackle increased cost of raw materials, we made a general price increase of 7.5% on orders received after December 1st, 2021. This will have a positive impact on our margins during the end of the year. In addition, we have added a temporary surcharge on aluminum due to the very high cost on aluminum at present. This will also have a positive impact on our margins. Combined, we expect these actions to bring us back to historical margins levels at the start of 2023.
As we already stated, we delivered another strong quarter in Q1 2022 that brought our Q1 revenue to $123 million, a year-on-year growth of more than 90%. Our adjusted EBITDA margin we are 44% impacted by the higher supply chain cost. As mentioned, we have made actions to mitigate the margin pressure, and we expect to see effects of these mitigating actions at the end of this year and going into Q1 2023. This will bring our margins back up to historical levels. The impressive order intake the last four quarters is $660 million, a year-over-year growth of 112%. This gives us a strong base to continue to deliver strong growth in 2022 and going forward. This leads us to the guidance page.
We outperformed in 2021, delivered a turnover of $328 million versus our guidance of approximately $300 million. Additionally, we have raised our 2022 guidance to between $550 million and $600 million. Based on our development in Q1, the demand has only strengthened our position to meet the guidance. The only challenge for us to meet the target is even bigger problems on the supply chain situation compared to what we see today. However, based on today's situation, we are comfortable that we will be able to meet our growth guidance for 2022. We expect to see the effects of the implemented price increase and temporary aluminum surcharge towards the end of 2022 and going into 2023. That will bring us back to historical margin levels.
Actually, if you consider Q1 actual figures with our pro forma calculation, where we include the price increase and surcharge, we will be back to historical margin levels medium-term. We expect to continue to grow 40% CAGR after the very strong growth we have had in 2021 and 2022. Thank you. With that, I hand word back to you, Hiva.
Thank you, Karl Johan. Thank you for those opening remarks. One of the things you touched upon, Karl Johan, is the rapidly growing automated storage market. Our Chief Revenue Officer, Mats Hovland Vikse, will provide a deeper dive into that topic. Mats, please.
Thank you, Hiva. I wanna touch on and give some more flavor about the market that we're operating in, our position within that market, and why the trends driving growth in this market are particularly relevant for us in AutoStore. First of all, we are operating in what's a large and under-penetrated market for warehouse automation or automated storage and retrieval systems, to be precise. The total addressable market in this market is worth more than $230 billion. If you look at this in today's terms on an annual basis, we're looking at a serviceable market of more than $5 billion, which is growing fast at a 15% CAGR. This here is a market that still has very low penetration rates. What's driving penetration here is megatrends that all of you know very, very well.
You have the shift over to e-commerce. You have the fact that we as consumers are getting more and more demanding. On top of that, we're seeing companies globally are looking more and more to solutions that reduces the dependency on manual labor and hardens the supply chain overall. I think to put that in context, Best Buy is a good example. They were saying to us that they had the perfect storm coming. They had SKU growth that was just off the chart as new products were coming out all the time. On top of that, they experienced an explosion in their e-commerce business that just made picking and this fulfillment operation more and more challenging. To address all of that, they invested in AutoStore. By using automation, they were able to revolutionize their supply chain network.
Having done that, today, they're able to reach more than 50 million people across the U.S. with free next-day delivery, and they're saving thousands of hours in their supply chain operations. I think that the point that I'm trying to make here is that these megatrends and this whole shift over to e-commerce is creating new types of challenges and new types of needs that ultimately is gonna need automation. As we show here on this page, this white space is massive. To drive penetration of that white space, we have built a solution that is so flexible that we can play across all relevant warehouse automation customer segments, fulfillment strategies, or sizes. Because on the one end, we're doing these large e-commerce distribution centers like we've done with Boozt, like we've done with PUMA, like we've done with Best Buy, and many others.
If you look to grocery, we're doing both the centralized distribution centers and we're doing the micro-fulfillment centers. When you understand the flexibility of our system, you can do also everything in between. We're also doing MFCs and other types of fulfillment centers outside of grocery, whether that is for a third-party logistics companies like DHL, DSV, GEODIS, or others, high-end fashion like we're doing with Gucci, or even at the large airports in Germany, where we're servicing the planes with spare parts for Lufthansa. We have a very broad catchment area with our system, and maybe the best way to sum it up is like one of the early customers of ours said, and that is, as long as the product fit within the bin, AutoStore should be a good solution.
If you're gonna take a step back and look at this market and who is playing here, you can say that it's mainly served by, say, four different technology categories or solution categories. First of all, you have Cube, which is a category that we have defined and that we dominate, which provides quite unique benefits when it comes to space efficiency, scalability, modularity, and flexibility. This here will fit for 90% of the market today. When adding frozen other capabilities in the future, we will even expand that. In addition to ourselves, you'll see names like Ocado, and to some extent, you could argue also Attabotics. In addition to that, you have Shuttles, which is kind of the primary legacy solution and which also currently hosts the largest market share in this market.
This is typically high CapEx and involves greenfield facilities due to the considerable vertical space that's needed. This is suited for the highest of throughput facilities. Here you'll see names like KNAPP, Dematic, TGW, Daifuku, and many others. Thirdly, you also have a category that's called AMRs or AGVs, which is the ground-bound robots that picks up these two-meter-high racks and drives them over to picking stations or variations of that. These AMRs is a kind of flexible and low CapEx entry into automation, but it requires significant space to operate that scale. Then lastly, you also have the Miniload, which is kind of a legacy technology that is typically also offered by the shuttle providers here.
In addition to these, you have some newcomers that has entered the market during the last years, which are more kind of shuttle AMR or shuttle cube type of hybrids, like you've seen with Exotec and Attabotics, which are neat solutions, but not providing any clear distinct benefits over any of these other categories. If you got a deep dive and look into this, fast-growing cube market, we are the clear market leader with close to 1,000 systems sold. As you'll see on the next page, we also have a strong pipeline that's underpinning the go-forward potential of our solution. If you look back in 2019, our pipeline was $2.2 billion. During the IPO, we presented strong growth from that.
We presented a diverse and healthy pipeline of $3.4 billion worth, consisting of opportunities that has been registered by our partners and our BDMs. Looking at this today, this has grown to nearly $5 billion, and it continues to be highly diverse across a variety of end markets and geographies. Maybe to give some examples. The micro-fulfillment opportunities within this pipeline has grown more than 100% compared to Q1 of last year, and we continue to see more and more demand for these types of solutions, both in grocery and in non-grocery retail applications. We'll talk more about micro-fulfillment and why this is favoring AutoStore in later sections, both by Tomáš from the Rohlik Group and also by Mike, who leads these efforts for us globally. I think overall, we're seeing strong growth across all categories.
This pipeline here and this global view of opportunities really gives us good visibility into the medium-term growth rate that we've guided on, and we continue to see strong interest. An important reminder of the pipeline. We only include live opportunities in this pipeline, and we have high win rates. Whenever an opportunity does not materialize into an AutoStore project, it's normally because the end customer decides to continue their manual operation, which in our view is simply a postponement. When we are in competitive situation with these other technologies that I showed on a previous page, we very seldom lose. Here is part of the reason. If you look at these key performance criteria in this market, you'll see that we deliver on all of them. I'll highlight some of these qualities.
I think the key result of all of this is that we deliver better ROI and shorter payback times than what you get with these older technologies. We have many examples where our customers receive their investment back in as little as one year, and when our space efficiency really kicks in, it can be even less. Let's touch on some of these. First of all, we have the most space-efficient solution in the market, offering up to four times more storage capacity versus other alternatives.
In addition to that, our scalability and modularity enables our customers to scale their systems according to what you need today, and then simply add more volumes as you grow your underlying business, which kind of helps phase CapEx, and it also drives better asset utilizations in situations where future demand is an uncertainty, which is very often the case when you operate in e-commerce. Another one is around reliability, because having a system that you can trust is just so critical when you operate in the world of e-commerce, serving demanding consumers like ourselves. We have an average uptime of 99.7% across the systems we have out there. This is best in class.
I think that all of this is why we've been able to gain share year after year, and we've made significant progress in building our install base and just further cementing that position since our IPO. We've now sold 937 systems across more than 40 countries, and we continue to see system sales across all different end markets, different fulfillment strategies, and all geographies. One of the more interesting segments for us is the grocery micro-fulfillment market, where we just see very strong growth opportunities going forward. One of the clients that has trusted us as the technology partner to help scale that business is the Rohlik Group. With us today, we have Tomáš, who is the founder and CEO of the Rohlik Group.
Tomáš has built an impressive business in online grocery, and will share with you some of the challenges that they have been facing and how AutoStore plays a role of making that a success. Tomáš, stage is yours.
Okay, thank you very much. Hello. Really nice seeing you all. I was asked, 'cause we've been building this relationship with AutoStore for quite some time now to tell you know, why we think AutoStore is just about the best automation solution there is. We really think that, you know, we are investing EUR 45 million now, but we will, you know, over the long run, and you know, you will soon understand once I present the company for those who don't know us, hundreds of millions in automation going forward. You know, why am I here? You know, who are we?
We've set out eight years ago, actually, to build just about the best online grocery experience, certainly in Europe, but, you know, maybe also in the world. You know, as shown by our growth. That's hard, you know, because you cannot make customer compromises, and then it's really hard to operate, you know. We knew that at some point, technology will catch up with our customer obsession. You know, it wasn't until AutoStore came to the picture for us where we found a great technology. What we are doing, you know, we doing same-day delivery from the order. You know, you may think, "Pfft, you know, that's slow, right?" Because now everyone delivers in 15 minutes, you know.
We have other stuff that, you know, really makes it differentiated from the quick commerce. We offer to our customers 15-minute delivery slot, so the order is really precise. You know, the planning is just basically taken out of the picture. We are really proud about our slot availability and SKU availability. So that basically makes us reliable partner for families. We always deliver, you know, what the customer orders. So I would say, you know, so far so good. I mean, nothing special in a way, right? Except in the countries where we are, we have the largest fresh share in grocery, you know.
That's why we are, you know, I think, we've tested AutoStore, you know, very much on chilled robots, and we are also, you know, very much focused on the frozen technology that was already mentioned. That is what is actually making us very different from, you know, other players in the market. 'Cause all that, you know, if you take incumbents, if you take quick commerce, that assortment, and that freshness, no other player is offering. Basically, we are now present in Czech Republic, Austria, Hungary, Germany. We've launched Munich and Frankfurt quite recently. We're launching Milan, we're launching Bucharest, and we're launching Spain, yeah, this autumn, so expanding quite quickly. Customers just simply love us.
That delivery, of course, is a super important part of why we're automating, you know. What is also very different is really differentiated assortment. We offer at that speed, 20,000 SKUs. That's very different to what, you know, for example, quick commerce is doing. This is not obviously pitch on Rohlik, but this is to give you full context why we've selected AutoStore because, you know, on 2,000 SKUs in very small micro fulfillment centers, it's maybe, you know, different technology or no technology because the space is too small, that is applicable. Our fulfillment centers are about 8,000-10,000 square meters, but they are really close to the city, so the space efficiency is really important 'cause we need to fit that 20,000 SKUs in, you know.
On the top, and I will not go into detail, is we're offering great value and we are very focused on sustainability. I just remembered I was asked to tell you thank you that I will take Q&A at the end of my short introduction if you have any questions. Now just to give you context about how we think about the market. Last year, our turnover was about just shy of EUR 500 million. We will double this year, the growth is fairly fast. Especially in the markets like Germany that will propel us to really multi-billion size and revenue.
All that, you know, at a high average order value because profitability is important, especially you know, these days. This is I think super important context, you know, 'cause I'm here to, you know, also represent AutoStore. That is just a tiny portion of the market. Right? That is exciting, in my opinion. Because whatever we do in the next 5 years, it's just really day one in, online grocery. Europe is EUR 2 trillion. That's a lot of money, that's a lot of micro fulfillment centers that need to be automated, you know. I think, you know, how we are thinking about AutoStore and automation in general. First, you know, technology really needs to be at your heart if you wanna succeed in that market, right?
If technology wasn't in Amazon's DNA, probably they wouldn't disrupt it, most of the retail. We have that as well in multiple fronts, but especially operations, and that is crucial. The reasons I think pretty obvious, they were already mentioned, but just to sum up. Of course, we wanna get more productive. We have fairly productive manual fulfillment centers, but automation can do a lot more. At that revenue, every percentage point of profitability increase is hugely important. Second, because we have really fast delivery and a large SKU count, right? We need to really squeeze every cubic meter out of that location we have. It needs to be close to the city. You don't get 50,000 square meter fulfillment center very close to the city these days. Not anymore, right?
You get that eight, you're happy, and you really have to make it work in terms of speed and in terms of density. Of course, you know, performance variability reduction, which you get with manual labor. One thing that, you know, maybe I'm not mentioning here, and it's not yet so obvious, but I think, you know, especially Europe will soon run out of blue-collar labor, right? As we grow. Now it's tiny, you know, the e-commerce and especially grocery commerce. As it grows to, you know, 50 million, 100 million, trillion, you know, there's just not enough people to pick. You know, let's face it, you know, people don't wanna do that work at a large scale, right? Automation is probably the only solution to scale in the future.
Now the relevant part, which is why AutoStore. A lot of it was already said, so I will just confirm how we are thinking about it. Reliability. Of course, we looked at the broad range of solutions. Mats mentioned them all. You know, the thing that we really like about AutoStore is that if a robot breaks, which happens very rarely, but it does in 0.3% cases, you know, the rest of the FC still keeps going, right? For us, let's say ten-minute breakdown of the full FC means ten-minute delay at every customer from there on, you know? Usually you don't fix breakdowns like that in ten minutes, so that means that basically you're constantly risking hours of delays at the consumer if you have that delivery speed.
With next day, you know, e-commerce, you can fix that, you can catch up. In our business model, you can't. Reliability is super crucial. Storage density, I've already mentioned, so, you know, that is something that I think was said multiple times. Flexibility and scalability. Whilst we are really cool company, as you might have seen, you know, and we've raised some money in the past, still, you know, like buying into AutoStore fully, like automating everything, is quite expensive. You know, we're talking already if we wanted to automate fully everything we have, you know, we're talking over EUR 100 million, probably EUR 200 million . We don't have that kind of cash today. It doesn't matter, because we can start.
We build a smaller grid, start with, you know, smaller amount of robots, and as we make money, you know, or raise more money, we expand. That is very important, because usually with other types of technology, especially shuttle, you're kinda very set, you know, in what you built at the beginning. So it's quite exciting to debate, you know, how many millions of euros we invest into that FC. Implementation speed for us, we are fast-growing, so we don't wanna wait three years to automate. The cost, which doesn't mean, you know, let's not please increase prices here today. I've heard, you know, margins multiple times, so. It is, you know, compared to the value we're getting, you know, AutoStore really is the best technology.
Not just for us, but I think for the market. I'm happy to answer any questions.
Thank you, Tomáš. It's very interesting to learn more about how AutoStore is really helping your growth strategy. As you say, there is now time for a couple of questions. If there is any. Yes, there are questions. I assumed as much. Exactly, if you raise your hand, we will come with the mic. Please, can you introduce yourselves by name and company? I think the gentleman, yes, exactly, there. That would be lovely.
Brilliant. Thank you for taking the question. It's Ben Heelan from Morgan Stanley. That's really interesting. Am I right to think that what really matters to you more than anything else for your business is the proximity to the town or city center, and therefore density is the number one priority? Is that fair?
If I was to single out, like all is important, but this is one of the very important reasons why we've chosen AutoStore, because, you know, every 10 minutes you're further from the city center means that you either have to build multiple locations around the city, which we are doing anyway, right? It just makes last mile a bit more expensive and a bit slower, right? We do care about our service level at customers. At some point it breaks. 1.5 hours or even 1 hour when you have multiple FCs is great. Therefore, you know, every kilometer we can get. And we've taken for that reason, you know, even smaller FCs, right? For example, in Munich, we have a very good location, but it was 7,000.
We took it because everything else was much further down, you know, much further from the city center. Even within that fairly small FC, we are building AutoStore.
That's helpful. When you first started building out these sort of internal automated systems, did you go through a tender process? Did you look at others? What other viable solutions did you consider apart from this one?
We've spoken to just about everyone in the market. We looked at the Shuttles, you know, very much with pretty much every vendor there is. We also spoke to other company that was mentioned in this Cube Storage. I don't know if I can mention their name. But like nothing really. We looked at the robots that are sort of, you know, earthbound and deliver the racks, you know. In terms of like large scale, AutoStore was the winner, and I think, you know, in terms of throughput, I think you can get faster technology. In terms of reliability and combination of all those reasons, you can't, and that was the reason.
Because throughput is great, but if it breaks and we are stuck for three hours or three days, you know, that that's not helpful.
Final question, thank you, is just around price. When you've been comparing this solution, AutoStore solution with others, how price sensitive are you? I mean, I get obviously that you're price sensitive, but if somebody were to come in with a slightly better alternative, how quickly can you make that decision?
Slightly better alternative price-wise?
Yeah.
With this, like, if it was absolutely the same technology, which I don't see in the market, you know, then of course you're. The price was the only deciding factor, then, you know, you're sort of looking at that deciding factor. I would also say, you know, maybe it's not the hard factor.
We're comparing with the price with shuttles.
It's a different technology.
Yeah.
Then again, the different factors come into play. By the way, ROI of AutoStore, you know, we should get our money back, you know, in 18 months.
So now-
You know?
Sorry, but I have to.
Yeah. Yeah, yeah.
Yeah, yeah.
We only, I don't mean to just cut you off, but we have time for one more question. I think that we can take the question from here. That's the one we have.
Okay.
We have a lot of interest, but.
No, it's fine.
Hi, it's George Featherstone for Bank of America. You've actually just pretty much answered the question, which is gonna be the return on the investment. Just in practice, once you get implementation and up and running, et cetera, how quickly do you get that payback period for across your systems?
Yeah, it's super fast. Right? It's depending on the labor cost in each market, you know, you're talking between even 12 months to about two years in sort of Eastern Europe, you know, where the labor cost is not so high.
Thank you, Tomáš.
Well done.
Thank you so much for your time.
Pleasure.
Yep, we appreciate it. Next man is Mike Demko, our Global Head of Micro-Fulfillment, and he will talk more about the micro-fulfillment revolution. Thank you, Mike.
Thank you, Hiva, and thank you, Tomáš. I think you've made my job much easier. I'm gonna repeat some trends that I think are very important in looking at micro-fulfillment as a total market opportunity. One, as already was mentioned, right, e-commerce within the next five years, one in four transactions coming through e-commerce. Secondly, that commerce is happening in urban environments, right? It's 90%+ of transactions in retail are taking place in urban environments. Combine that with the fact that companies like Amazon are pushing consumers, and consumers want it now. Convenience and time are a continuing trend, and everybody wants it now. That world of distribution centers outside of city centers, the world of getting something in two days or one day is going away.
In order to satisfy the consumer against these trends, fulfillment has to move into the city centers. In order to move into the city centers, it has to be micro-fulfillment. That's about the transformation of retail into both an in-store and e-commerce experience. What does that mean in terms of numbers? We're really in the early days, as Tomáš mentioned as well. You know, right now, micro-fulfillment represents only 4% of the total automation marketplace. That's roughly $200 million today, but we're looking at a tenfold increase in that market in the coming years to $2 billion+ in micro-fulfillment. It's not just grocery, right? We're talking about retail more broadly, and I'll talk about retail transformation here in a second. I think it's also important to note, we talked about a lot of different technologies, right? What is a pilot?
This is new technology. A lot of retailers are risk-averse. Grocers, especially with the thin margin business, especially risk-averse. This concept of a pilot is, how do I try it before I really buy it and scale and roll it out, right? Today, piloting is a piece of the business. Thankfully, we've got some very forward-thinking retailers who are moving beyond pilot and rolling out in scale. What is micro-fulfillment, right? We talked about it's moving distribution from outside of the city into the city. It's about the transformation of retail. It's not about one in four transactions being e-commerce. The performance, the financial performance of that store asset is getting depressed, right? No longer am I getting the same revenue per square foot that I did before, so retailers have to repurpose that real estate.
As a result, we're not talking about greenfield opportunities in city centers. We're talking about brownfield opportunities. We're talking about fitting inside of buildings with really low ceiling heights. We're talking about fitting inside of buildings with really odd floor plans, right? Retailers need a very flexible and scalable solution to fit within that brownfield retail storefront that exists today. On top of that, as Tomáš mentioned, it's storage density, extremely important in this equation, but the other one is reliability. As you get closer and closer to the consumer, as you're trying to deliver their dinner within a matter of hours, you can't get it wrong. It's not just about lost revenue, it's about losing that customer forever if you fail. Reliability, extremely important. That sets up AutoStore to really be the winner.
We are candidly well-positioned to dominate this market, given our scalability, flexibility, and reliability overall. It's not just about automation. I hate to say that as a guy who works for an automation company, right? Software, and software is a really critical part of orchestrating this, right? As Tomáš mentioned, this is a very difficult business, and I can speak to this directly from experience as well. I'm not just a technologist. I ran operations at FreshDirect. I was a CEO at another online grocer in the United States as well. With that, a lot of operating experience behind the scenes and into the DNA of our technology. We're talking about orchestrating order fulfillment across three different temperature zones. We're talking about orchestrating order fulfillment across manual and automated processes. Back to Tomáš's comment, 20,000 SKUs.
A typical grocer in the United States has 40,000 SKUs. They still offer those other 20,000 SKUs. They have to rely on the store floor for those other 20,000 SKUs. You need a technology that can orchestrate in-store picks with automated picks, with manual picks, with frozen, chilled, et cetera. All that orchestration requires a really solid WMS. We need to look at batching and waving of those orders. We need to figure out how to minimize footsteps on those manual processes. We need to figure out how to minimize robot movements with those automated processes. That is all about waving and batching and orchestration. The WMS is critical to that. Retail e-commerce has changed the cost equation for the retailer as well, right? In the past, the consumer spent 45 minutes walking through the store, picking that order. That was labor.
That labor now is on the back of the retailer. We are looking to push that labor back into the consumer's hands, right? Creating consumer-facing aspects to our technology is critical to changing that cost equation back onto the retailer and to the consumer. The consumer wants to be involved. They love technology. They wanna lean into technology. Creating consumer-facing ports is a critical aspect of success as well. Lastly, last mile, the hardest thing to do. Retailers don't wanna own it. They're relying on third-party logistics companies. The gig economy is alive and well as it relates to last mile delivery, and often retailers lean on many of them. You've got to have a WMS that can integrate with multiple platforms, last mile platforms in that process.
All in all, it's not just one site. We're talking about a network of sites. We're talking about a network of stores integrated to a distribution center, providing the retailer with visibility into their inventory across their entire network. Figuring out how to deliver the right order to the right customer from the right place is also inherent in our a good WMS strategy. While I just talked about a whole bunch of features and functions as it relates to, you know, executing on operations, another big differentiator is the technology. I won't, you know, bore you all with tech details. I'm a little bit of a geek myself. Suffice it to say, we have a software architecture that goes hand in hand with our hardware architecture. A very modular microservices product framework. What does that mean?
It means that it's in the cloud. It means that every client is on the same piece of software. It means that we can turn on and off features on a client-by-client level instead of having to customize that software on a client-by-client level. That allows us to get to market faster, and then through an API architecture, allows our integration partners to integrate with the client's IT systems much more quickly. That equates to getting to market, standing up a system in a matter of 12-16 weeks, as opposed to 9+ months in a typical legacy WMS software implementation. We take on an Agile software development process, much like the best of the best, the Googles, the Facebooks, the Amazons of the world.
They're all using Agile as a way to get product developed much more quickly, as a way to stay ahead of the competition. Hand in hand with that is a, again, buzzword, CI/CD, continuous integration, continuous deployment. What does that mean? That means that instead of doing major software releases, we're releasing software little bits at a time. Every day, we're doing a software release. Every client is on the latest and greatest version. What does that mean? That means a much higher software reliability. Software reliability going hand in hand with automation reliability. To sum it up, right, what really sort of are the key requirements to success? We talked about it already. You know, we're talking about reliability, hardware and software reliability. Best-in-class hardware reliability with AutoStore, best-in-class software reliability with AutoStore's WMS.
We're talking about you know, things do fail. Back to 0.3%. It's 0.3%. The point is, it's a graceful failure mode. I love the you know, as an operator, the simplicity of AutoStore is its elegance, right? It has any bot can get to any bin, any product, and deliver to any port. The failure modes are graceful when they do occur, so you don't disrupt your operation. If I've got 30 robots, one goes down, my capacity is reduced by one-thirtieth. It's not that I come down hard. A very graceful failure, but a very highly reliable system. Consolidation. Not only were we bringing storage density to inventory, but we're bringing storage density to completed orders as well. We allow orders to be completed and put back into the grid, right?
Not only do we have to worry about, you know, storage density as it relates to completed orders, but we can do that with inventory as well. We can now use the AutoStore as a shipping sorter. We can figure out how to reverse, stop, load a truck based upon the orders in the grid. On top of that, again, consumers want it now. The interesting dynamic there is that it's only about 20% of the consumers. Even though the whole business model might be based upon a two-hour delivery from click to collect, about 80% of them actually complete their orders the day prior. A large nerve of consumer behavior is still about advanced planning, so we're pushing the envelope on those 20% who really want their order to be able to.
They don't wanna, you know, plan ahead. They wanna order today, and they want it today. 80% are still planning yesterday for today. What does that do? It allows us to balance those resources. The in-grid consolidation allows us to pick that order, stage it in the grid hours ahead of time, and level the load so that the peak isn't a demand on resources, both labor and robotics. With that too, we're talking about, again, putting the consumer in charge. They wanna lean into this technology. We're talking about, again, a network effect and being able to provide the entire network of operation for the retailer as well. While Tomáš has shared a great case study around grocery, and I think it's really noteworthy too.
IKEA, one of IKEA's largest franchise holders, I think it's the Ingka Group, here in Europe, just announced yesterday a $3 billion investment in transforming their stores into e-commerce fulfillment centers plus a store experience, right? This isn't tomorrow, this is today, and AutoStore is enabling this today. Another great example, Decathlon sports retailer in the Canadian market, the first to transform their stores into an e-commerce plus in-store experience, and AutoStore made it possible. Our storage density allowed them to take that 63,000 sq ft and repurpose it into more of an experiential retail environment as opposed to a transactional one. They opened up a gymnasium in that store.
They opened up a cafe in that store, so consumers could engage with their merchandise, and consumers could watch others engage with that merchandise. They didn't just put the technology behind the curtain. They put the technology right out in front of the consumer. Consumers can come into the store, place their order on their phone, or place their order from home, and come into the store and see that order fulfilled in front of their eyes, as well as walk to a customer service desk and have that order handed over to them in a matter of minutes. Again, it's about the transformation of retail into experiential retail. It's the way retailers are gonna have to compete in this market going forward, and we're enabling that today. Thank you.
Thank you, Mike. Very interesting. Yeah. Thank you so much, Mike. Innovation and product improvement are at the heart of AutoStore. The question is always how can we make our product more efficient and faster for the customer? To speak more about that is our Chief Product Officer, Carlos Fernández. Please, Carlos, join me on the stage.
Thank you, Hiva, and thank you everyone for being here today. It's so exciting to talk about our technology, and you have heard from Tomáš, how they are actually benefiting from this great product. Before we jump a little bit more into the details here, I would like all of you to take one step back and try to understand where all this began. We are back to 1995. At that time, we were actually running a distribution business of electronic components, and we simply ran into a problem that many of our customers today actually experience, which is they lack space in the warehouse to continue growing the business. Our technical director, Ingvar Hognaland, walked into the warehouse and saw something nobody else did. Where everyone was actually seeing shelves and boxes, he was seeing a lot of unnecessary air.
He had a vision. He saw a different way, a unique way, to solve this problem and allow us to grow, and today I would like to show you this vision.
At the heart of trade lies the ability to deliver the right product at the right time, to make a promise and to keep it. Most warehouses are messy and inefficient, wasting space, losing time. Introducing Cube Storage Automation from AutoStore, revolutionizing the way we store things and the way we move them. All inventory is stacked inside a cube. Smart robots sort and retrieve with superior speed and precision. Space redefined. Every second, every inch optimized. Some of the best warehouses in the world are powered by AutoStore. Whatever the shape or size of your warehouse, promise perfection. Deliver perfection. Warehouse robots from AutoStore, the cube storage pioneers.
The beauty of this technology is that it's just built out of five standard modules, and these five standard modules combined can create any solution out there. We start with the inventory bins, where we store all the SKUs, and we stack these bins on top of each other, creating a very space-efficient and compact solution. There is no need to access the bins from the sides, as other technologies do. We instead fetch them from the top with robots that are driving on top of a light aluminum grid, and these robots are delivering these bins to the workstations, where the associates will pick the complete order. The key for efficiency is the software that is running this behind.
The software will make sure that we are prioritizing the right bins to the right ports at the right time and making sure that we are always delivering on time. Because it's very modular, there is no single point of failure, which is definitely helping from a reliability standpoint. We have been working for more than 25 years to further optimize this platform and improving our software so that we can address more and more use cases. We have been talking now about the value proposition, how we are addressing all the things that customers value the most.
I don't want to repeat some of them, but definitely throughput is very important since they need to be able to deliver faster to the consumers. Space efficiency is key, but there is something that is very, very important in AutoStore compared to other technologies which maybe haven't been mentioned, which is the ability to consolidate. When you are expanding the systems, there is a point where you will need to bring all the different components for an order into one single location so that you can pack and ship that order to the customers. Other technologies require additional technology like conveyors in order to bring all these components together. That is wasting a lot of space and money. Instead, in AutoStore, all of this is happening inside of the cube.
It's not only a very space-efficient fulfillment engine, but it's also a great consolidation engine and sortation as well, all in one grid, all in one platform. I would like to explain or share with you a little bit more about the team behind this great technology. They are the ones responsible for the success of this technology. We have been growing the team greatly over the last year. Now we have tripled the organization to approximately 160 FTEs, and we will continue to attract talent on the main markets. Some of you may be wondering, how is it possible that with 160 engineers, you plan to tackle a $230 billion market? Well, I think the keys are strategy. Since the very beginning, we have been very focused on standardization.
Other technologies, they customize for every project. In AutoStore, we just deliver the same standard modules again and again, which allows us to invest our time in just creating the solutions that will address new use cases and that will be used by all customers across all verticals. Looking into the future, we are mainly working today in four areas that we see the biggest growth. The first one is warehousing. This is where we are coming from. This is where we started, and we are seeing there is still a growth there. We can continue to develop and optimize our technology so that we can, as Karl mentioned, handle grids with thousands of robots, so that we can preserve that value of consolidation that is so important for our customers. Another area is retail.
We have seen an example from Decathlon, where they are actually focusing on using our technology to transform the customer experience. There is great opportunity for us in that segment as well. E-com, where AutoStore as a platform can allow the long tail of e-com customers to own their own operation. Finally, grocery, which Tomáš has really explained us how AutoStore is helping them. Here, there is a unique opportunity for us to improve our technology to offer a solution that is not something alike in the market. I will show you a little bit more about how we are working with this. This is our innovation hub. As we are growing the organization so rapidly, we need to also equip our engineers with state-of-the-art facilities, so that they can test at real scale all the innovations that we are working on.
Behind these walls, we are actually shaping the future of micro-fulfillment. We have built one solution, one grid, that supports all the different temperature zones. We have a state-of-the-art climate chamber where we can expose our standard components to different environments as they will be exposed at real sites. Here, what we have developed is a solution, a concept that will allow us to automate all the components for a regular basket, including dry products, fresh products and frozen. Doing that always built around the same five standard modules, which is the key for us. We are very exciting about what's happening here, and Tomáš was there a couple of months ago, and I think he shared the excitement about the future opportunities that this may bring us.
If we look a little bit about what makes our R&D organization successful, is the ability to release new products constantly. Here we are focusing a lot on expanding to new use cases. A good example is the recent release of the R5+, where we are now allowing the Red Line to address more use cases, handling the 425 mm bin at a lower cost. We are also continuously improving the technology and the products that our customers love, like the Carousel 4.0 or the Bin Lift 2.0 that we have also recently released. As you may see here, software is always there. We have been working both with software that helps us improve performance and also reliability, as I will show you in the next slides.
We have said now for a while that software is core to our value proposition. Why is that? Well, when we think about a fulfillment application, there are several layers of software that will play into it. You have, on the physical layer, a software that will make sure that every system runs as efficient as possible. On top of that, you will have what is called a warehouse control system, which is basically taking care of all the mission control, activities. On top of that, you will need to have a software that will orchestrate everything that is happening in the facility, all the different activities, all the different processes, as Mike explained, where you are handling automated picking with manual picks, different temperature zones. This is the responsibility of the warehouse management system or also the warehouse execution system.
Today, AutoStore is present on all these layers, and we have the ability to deliver an end-to-end solution to customers. Now I want to take you through each of these examples so that you can understand how software is important to deliver on the value proposition. The first example I want to mention is our own grid traffic control software. We call it the Router, and this is truly a game changer in the industry. What this software does is that it recalculates the robot's routes every second, which means that now we have the ability to expand the grids greatly and yet maintain the same efficiency per robot.
Not only that, we can actually increase the contribution per robot up to 40%, which means that now we can deliver the same throughput at a lower cost, or even we can quadruple the amount of throughput that one system can deliver. Not only that, micro-fulfillment center is all about bringing solutions closer to consumer to deliver high throughput. That means we need to use the density, but we also need to deliver throughput. The Router is allowing us to place twice the amount of robots per grid, which allows us to also drive high throughput. On the right-hand side of the slide, you can see how the software has been a key driver of growth for our customers over these years. Remember, this is built on the same platform. All these customers are using the same standard modules.
Another aspect that has been mentioned is reliability. Of course, reliability is built around the fact that we have standard modules, and quality is key for us in the design and in the manufacturing process. Software is so important as well. We have developed over the years a very smart software we call the Exception Handler. What this software does is that based on all the input from the up to 50 sensors that all robots have on board, we can predict, and we can self-correct whatever error they have, up to 98% of the errors, without the need to stop the system. That is one of the reasons why we have the highest uptime in the market, 99.7%. Another aspect of our successful story here is our go-to-market strategy.
We have software today present in all the different steps of the customer journey, and everything starts with our ability to design and simulate in a very accurate way the solutions that we will deliver. We are very proud of our design tools. These are cloud-based design tools that are built on the same software, on the same core software that is running in the facilities. As Mats will expand on shortly, we have up to 2,000 sales representatives around the world selling AutoStore, talking to customers every day about AutoStore. They are equipped with these tools that allow them to really design the best solution for these customers. These tools are also built in a way that they
There is a very easy connection to our CRM, so that it gives us always very accurate information into the pipeline, so we understand which are the projects and the size of them. Last but not least, WMS. Why is it so important that we can also deliver this? Well, there are certain applications, like micro-fulfillment centers, where customers are thinking about standardization, simplicity. They want to have the ability to roll out multiple sites at a lower cost of integration. There is a great opportunity for us to build one product combining the best WMS software stack that we have today, cloud-based, multi-tenant, built around microservices, so exactly with the same principles that AutoStore has had over the years, so that we can deliver that complete solution, and we can get all the benefits into the cube so that we can drive further optimizations.
If we try to look a little bit more into the future, I think it's important to understand this journey. As I said at the beginning, we were running a distribution business ourselves, and we run into the same problems our customers have. At that time, we had a great idea on how to optimize the space. We have built software over these years to try to further optimize the performance. There is a great opportunity to continue on this journey by not only improving throughput, but also making our solution smarter by utilizing all the data that we are now collecting for up to 35,000 robots that we have deployed across the world. We have really only scratched the surface of what this great platform called AutoStore can deliver. Thank you.
Thank you, Carlos. Now we actually have time for some Q&A. You can actually stay, Carlos, and I'll ask Karl Johan Lier, Mats Hovland Vikse, and Mike Demko to come on the stage. We'll take some questions both from our audience here in the room, as well as our web audience, if there are any questions. Again, exactly raise your hand, and we will come with the mic. Please introduce yourself. Can we please take a question down here? Down on the second row. Thank you.
Thank you.
Hi. This is Kathinka de Kuyper from JP Morgan. Thanks for taking my questions. Maybe the first one for you, Mats. When we look at the pipeline, what would you say is the split between HTP standard and MFC, and where do you see that split going?
We've seen HTP, i.e., high throughput, and micro-fulfillment taking share or growing faster than the standard segment. I think directionally now, that would represent maybe one-
third to a half of the pipeline versus a very small share in the past. I think an interesting dynamic to think about, though, is that the micro-fulfillment market in itself is a quite narrow market, but very deep, given that you need multiple distribution centers to handle the same level of volume. The way we register our pipeline, we only register the opportunities that is being actively worked on, so inherently there is larger opportunities long term within that pipeline size that we have today.
Great. Thank you very much. Carlos, on the software side, where do you think you're still lacking, and would you like to further invest or maybe acquire technologies?
Well, I think as we have said, there are great opportunities from that perspective as we are thinking on improving the customer experience as well. As we are delivering end-to-end solutions in some specific applications, like micro-fulfillment, we can definitely invest on enabling better customer experiences.
Thank you. Any other questions? Yes, in the middle.
Over here.
In the middle.
Okay. Got it.
Maybe we can pass it along.
Sorry. Thank you very much. Victoria Petrova, Credit Suisse. My first question is probably to Karl Johan and Carlos. Could you briefly highlight the key differences between grocery and non-grocery solutions in terms of your solution and software? I imagine that obviously the perishable nature would be the key differential. How do you address it? How much more complicated your grocery solution is versus your standard non-grocery apparel, for example, solutions would be? And what additional, maybe if you answer it, investments are related to you going deeper into grocery partnerships?
I think, yeah, I can just say that AutoStore is always consisting of five standard modules, whatever customer you speak about. Of course on grocery, there are some elements that we are working on that you can say more about.
It is a very exciting market, as a typical basket will be based on different products that will require different temperatures. For instance, you have dry products, you will have fresh products, and you will have a frozen part as well. So as Karl Johan said, what we are working on is we are trying to understand what is the way to build around our technology so that we can maintain the same five modules standard and not make any modifications, 'cause that has great value to our customers. Then how to handle all the specialties that are around this business, this needs to be driven by a very solid WMS that can account for all the exceptions, all the different zones and how do you handle them, and how do you consolidate the order.
Maybe Mike, do you want to add something to this?
Sure. Yeah, I'll add to that. Right. To your point, perishables is probably one of the hardest aspects of grocery, so inventory control and management, understanding expiration dates, doing a first to expire, first out approach as opposed to a first in, first out approach, providing the operator with all the necessary tools. Best practices, you know, is how do you teach somebody in front of an AutoStore to think that they are actually filling the groceries for their mother's table, right? That's providing the visual tools and allowing them to understand quality control in that process as much as efficiency in that process. Those are the differentiators from a software stack perspective. Honestly, back to, you know, Tomáš's earlier comment, labor, right? We understand as AutoStore where we fit in a total solution.
The WMS can also orchestrate things like robotic picking. Creating an open interface to other material handling solutions, that being the periphery of the AutoStore, robotic picking, AMRs, conveyors. That's another piece of what we're solving as well, is an open architecture to allow all of the supporting equipment to come into the equation as well for really a best in class end-to-end solution.
Thank you very much. One follow-up, I promise. It's probably to Tomáš. Briefly. You mentioned that it's a two-hour delivery, and of course, we're seeing more and more immediacy grocers coming in, and everyone talked about bringing micro-fulfillment closer to customer in urban, highly densely populated area. Is there a way you can reduce your delivery time with AutoStore solution to, let's say, below 30 minutes? Thank you very much.
I guess, that's one of the reasons why we're doing it. For one, I think delivery of 20,000 SKUs in 15 minutes does not exist. That's one. It's not necessary, and I think we will see a lot of regulation in urban areas. What I've seen from AutoStore, and I think this is one of the reasons why we're working with the company, is the tremendous progress, in the time we're working together. Like, of course, we're now talking about, you know, chilled, we're talking about frozen, and I think there will come a time where we say, "Hey, guys, now you've doubled the speed, and maybe can you do that again?" You know? I am absolutely sure that this company can deliver, so that's why, you know.
It's a journey, of course.
Thank you very much.
Any other questions from the audience? Yes, there are. Let's see. Yeah. Okay. We can take the question here.
Yeah.
Yeah.
Thank you. It's Martin Wilkie from Citi. A couple of questions. The first one is, you now have the R5+, which is a bigger robot. Does that give you enough scope in terms of products that you can sort and pick that you don't need to have a new, bigger version or anything like that? I mean, is your offering today effectively as wide as it needs to be? That's the first question.
I can, yeah, I can take it. Yes, what we have seen is when we released the Black Line, we have seen a very big demand for the 425 mm bin, as it is a very good size to handle, for instance, the apparel business when it comes to shoe boxes, but also in the electronic distribution business, in addition to grocery, where it can be a very good fit in order to consolidate pre-picked orders. What we see is that with the R5 plus, now we can address even more use cases with the Red Line building on top of that platform. Definitely, we are looking into new use cases, either by increasing bin sizes or improving on the robot technology. That is something that we continuously look into.
We believe that with the current portfolio of robot solutions, we can address all the, or most of the applications that we are seeing today in the market.
If I can have a second question. It came up on the call this morning, but we have seen companies like Amazon talking about investment slowing. But obviously you've got some very different niches here with the high throughput and the micro-fulfillment. I mean, I guess you don't see the entire market necessarily, but is that the reason why you can continue to see this growth rate, that you're starting from a market that is so vastly under-penetrated that you can still see this growth even if other parts of warehouse automation are perhaps a little bit slower?
I can start, and then you can elaborate. There is no doubt that you see that in the e-commerce side now, there is some slowdown after the pandemic, the society's opening up after the pandemic. We think that is quite natural. It doesn't change the underlying long-term trends, that we are in an under-penetrated market supported by secular megatrends that will make this market to continue to grow for decades, really. I think that's really the base, and then you can probably elaborate more.
Yeah. No, I think you're onto a very important point there because we are kind of supporting that mix shift of capacity from what you could call traditional warehousing to micro fulfillment and these types of applications that we are addressing quite uniquely. In addition to that, if you think about our role within a warehouse, we are mainly targeting the storage and picking part of that operation. What have we seen on megatrends related to that? We've seen historically low unemployment rates, i.e. being dependent on manual labor is difficult. We've seen wage inflation, wages going up, i.e. the business case for a solution that can reduce labor needed is more relevant than ever. Thirdly, we've seen construction cost, lease costs for warehouse space go up quite significantly, both in U.S., Europe, and we've seen tendencies in APAC as well.
Having space-efficient solutions is very important.
Thank you.
The result of that, and to reiterate what we said on the quarterly call that you referenced, we haven't seen a slowdown in demand as a result of it.
We'll take some more questions from the audience. In the interest of time, can we please stick to one question per person? George?
Thank you very much. George Featherstone, Bank of America. Just want to touch on the warehouse management software opportunity, if I can. I know that some of your distribution partners also offer that solution. Just in terms of competing against them, how does that work? Does it create tension? Are you going after different types of customers? Within warehouse management software, what are your internal targets in terms of growth rates and profitability?
Yeah. Maybe I can start. First of all, we are creating an option for the partner to have a even sort of more broader portfolio from us available to sell in the market. Secondly, we are bringing in functionality, as kind of Mike was talking about, that doesn't necessarily exist with all of these partners, making them more competitive in what will be a very attractive market going forward. Overall, the reception from the partner network has been very positive, and we're scaling it and building it into the machinery that we have on the go-to-market side so that we can scale that efficiently through that network as well.
Questions? I think Eirik in the middle, maybe there, if we could pass along the mic.
Yep.
Oh, sorry. Here you go.
Perfect.
Thank you. Eirik from Carnegie. Karl , I think you mentioned the APAC assembly facility. I remember we talked about that in the IPO process as well. What's the status there? And also in terms of the growth you're projecting for the medium term, how much more growth can Poland handle before you have to go and open something new?
I think Israel will speak more about that later on. Generally, we can handle much more in Poland. It is also about second source of supply, really. We will go more into detail on the APAC assembly plan when Israel is speaking. During next year, the plan is to have coming a long way on that work.
Thanks.
We have time for two more questions, I believe. In the back, could we please pass along the mic?
Afternoon. Lucas from Jefferies. Just on the slide where you show the value proposition, I mean, you were ranking very well, best in class, often in a lot of those stats. Just on throughput, where, as Tomáš was saying, there are other things out there with a better throughput, how do you think about that part? Do you think it's important for you to work on, you know, delivering even higher throughput, or what you have today is enough to kind of conquer the market? Thank you.
I can start. After we released the router software, we are able to compete on most high throughput opportunities out there, and I think that's very well representative of our figures as well. We've been taking a lot of share in that segment. There are, however, some edge cases where especially the shuttles still provide higher throughput than us. Think about having a lot of building height, you have low revenue concentration at SKU level, so you have a relatively flat distribution in your goods profile. In those situations, the shuttle will still be more efficient from a throughput perspective. Of course, Carlos and team working relentlessly is to continuously improve on that metric as well. Now with the addition of the WES and WMS, we're also able to expand those capabilities through that part of the stack.
To add a little bit to that too, that's a numbers game too that the competition often throws. You gotta step back and look at it from a total solution perspective, and how fast can a human being actually move in the context of that number often gets lost in that conversation. Educating the market on the fact that human beings need to still be a part of the total solution. Throughput has its limits on the machine side, because the people can't move fast enough. I think, you know, part of that too is shifting the conversation to make sure that we're making people as efficient and as fast as possible. Right now, the machine is exceeding the throughput capabilities of people, candidly.
Maybe just to add to this. We have been working over the years to have a portfolio of workstations that will go everything from a very slow process to a very high throughput process, so that we can offer the right workstation to the right application covering the entire spectrum.
We have time for one more question before we take a break. Any question from the audience? Okay. Well then, that means that we have time for a break. We'll be back at 3:20 local time. That's 4:20 Central European Time. You'll have opportunity to mingle with the management outside the auditorium. Okay? That's break time. Welcome back to AutoStore's 2022 Capital Markets Day. I hope that those of you who are in the audience or here at the LSE have had the chance to look at our robots. If not, you'll get a chance after we're done with the second session to have a look at our robots outside. Before the break, we learned more about our R&D efforts.
With so much innovation going on in our organization, our General Counsel, Jenny Sveen Hovda, will speak about our IP and patent strategy. Please, Jenny.
Thank you, Hiva. My name is Jenny Hovda, and I joined Autostore as General Counsel in February. Before joining AutoStore, I was a partner in a law firm and leading our IP and technology practice. I spent much of my career working strategically with IP, litigating infringement cases, and coordinating such actions in multiple jurisdictions. Today, I am going to talk about how AutoStore protects the innovation we have heard Carlos talk about before the break. Before I start talking about the massive patent portfolio of AutoStore, I think it's fair to underline that it's not just the patents that gives AutoStore its competitive advantage. The most important is the business itself. As Mats keeps repeating, it is the combination of multiple key factors that are hard to replicate that secures AutoStore's position as the number one cube market leader.
It is the great products, it is the efficient go-to-market model, and the reputation amongst customers being a brilliant product with a superior ROI. Keeping in mind that the business is the most important, let me dive deeper into how we work with patents. AutoStore's diverse and expansive patent portfolio is a vital part of our business asset, and it underscores the business model of innovation leading the path to development. The current growth of our worldwide patent portfolio is staggering. We have 462 patents in total, granted patents, representing an increase of 43 granted patents in the first four months of this year alone. We have 721 patent applications being submitted at a rate of more than one application a week. Like most innovation companies, AutoStore takes protection of its intellectual property, and by extension, its business, very seriously.
We have a range of strategies which, when combined, create a strong IP portfolio, firmly securing AutoStore's position in the Cube Storage market and allowing for synergetic development in the key technical areas. The strong core of AutoStore's patents focus on the key implemented technologies and accounts for about 10% of total patent families, and this covers the technology currently used in our products, and that is such as the central cavity, a wheel synchronization, battery exchange mechanism, the design of the foot of the column, two level grids on uneven floors, and many more. It's important to note that the remaining 90% of the patent families protect all the surrounding technology, safeguarding AutoStore's prospective development.
This could cover technology not currently found in the AutoStore product, but that are under active development or in the R&D pipeline, such as automated robot picking stations, cooling solutions within the grid that we have heard about. It could be fire safety solutions, port technology to facilitate higher throughput, as we have heard about, and much more. We have a systematic approach to safeguarding the existing portfolio. This is particularly relevant for providing us the freedom to operate, launch new products with exclusive rights, and to retain our position as leader in core markets. We have a strong backbone of specialist advisors, both legal and commercial, that assists us in this overall patent strategy, managing risks and taking legal actions. AutoStore has a modern patent portfolio which supports our innovation. Let me give you a flavor of what our current patent catalog consists of.
Obviously, we have a range of categories, as Carlos has mentioned. We have hardware, like the robots, ports, bins, grids, and totes. We have software related patents, such as the dynamic routing, which you've seen, diagnosis and corrections. We have patents related to IT communication and control, such as application of cloud computing to simulate warehousing requirement and assist designs, and safety related patents, like solutions for fire safety. The current industries and sectors that AutoStore products have been deployed in are retail, like e-commerce platforms, groceries, third-party logistics, industrials, like manufacturing, and healthcare. Each of these sectors has experienced an immense and rapid change in the past few years, and this has required us to adapt quickly as well to anticipate and accommodate their changing requirement and exponential growth and demand for certain products to help customers retain their competitive advantage.
In line with our vision of staying ahead of the market, the AutoStore team are working on new product launches that improve our existing product offering as well as penetrate markets. As you've heard in the previous presentations, the grocery market is becoming increasingly interesting. We have some notable products in the pipeline that we are dedicating innovation efforts to, such as these advanced grids with variable temperature zones to effectively manage the storage space and store temperature-sensitive products like food and beverages. As you've heard, this product is an important innovation and opening up the grocery markets. Another area where we are dedicating innovation efforts to, also found again in our patenting, the application of artificial intelligence software to dynamically route traffic on the grid, diagnose and correct any delay-causing issues, and increasing throughput and minimizing downtime. We are well-protected in all our key markets.
One of the core elements of AutoStore's vision on growth is to consolidate and extend its presence across the world. Our business focus has diversified into continually innovating to protect and leverage our expertise and ideas in new markets. We have growth in new markets in Asia, with a focus on tapping potential first in South Korea and Japan. From 2015, the number of patents and patent applications in these markets have more than doubled. We are now further expanding our portfolio in Asia, preparing us for a bigger presence in those markets. We recognize that the defense of our patents has sparked interest both from media and from the investor community.
I think it's important, however, to bear in mind that both securing our innovation through patenting and defending it when someone takes unjust advantage of it is an ordinary course of being an innovation company. Like all companies with patented innovation, our approach to defending our patents is motivated by a range of commercial factors not unique to AutoStore. It is first protecting our proprietary technology. It is one of the means to protect our market position and reputation. It is to maintain the freedom to operate and commercialize our inventive technology, and it is to recoup the upfront cost of further research and development. We have a toolkit, but we are not a litigious company, and we only use litigation as a means of last resort when all other avenues have failed to resolve a dispute.
Before turning to litigation as a tool, we make a thorough assessment in line with what is best industry practice together with our highly specialized advisors. Though we are not a company that takes lightly on litigation, AutoStore is and will be prepared to enforce its intellectual property rights and to defend them if the circumstance calls for it. Let me give you an update on the cases. AutoStore has filed patent infringement lawsuits in the U.S. and U.K. against Ocado, an online grocery retailer and technology company. Ocado has also filed actions against AutoStore in the U.S. and in Germany. AutoStore is seeking court orders barring Ocado from manufacturing, importing, using, and selling technology that infringes AutoStore's patents, as well as monetary damages.
AutoStore took these actions because it pioneered the technology that is at the heart of Ocado's OSP, and we will not tolerate infringement on our intellectual property. There are just two main updates on the cases itself. First, the adverse decision from the International Trade Commission, the ITC in the U.S., has now been appealed. Second, the case in High Court of Justice was heard in March and April this year, and we are expecting a decision in Q3, and we'll of course update you all then. We remain confident on our ongoing litigation position. A victory for AutoStore presents potential upside of damages from Ocado and injunctive relief. However, it's important to note that the downside risk from an unfavorable decision is small, as the outcome will not impact AutoStore's ability to commercialize its technology in the U.K. or elsewhere.
For those of you interested in more details, some of you have followed this for a while, we have tried to break the case down in an appendix in an overview. We will also answer all questions you may have about the case later in the Q&A session. Thank you.
Thank you, Jenny. Now let's welcome back our Chief Revenue Officer, who will talk more about our scalable go-to-market model. Mats, please.
Thank you, Hiva. We're operating in a massive market. We have a very strong product that is well-protected. What's missing? We need to have a good go-to-market model that enables us to bring out these products. Here we are. We have a scaled and unique business model where all sales are going through a carefully built network of integration partners that we are very close to. This network has a global reach and allows us to scale very efficiently in really all markets and all geographies. The simple way to look at this model is that we are providing our partners with access to our standard modules, the robots, the ports, et cetera, in which they design and integrate to become a fully working solution for the end customers. This model is highly scalable.
It produces strong financials for both us and our partners, and it puts our products into multiple different solution designs, which in turn, again, drive market access for us and enables us to be laser-focused on building the best products and driving even more growth. As a complementary capacity to this partner network, we're building out our own team of business development managers, and these BDMs, they create leads and opportunities out in the big markets, which we in turn hand over to the partners for execution. At present, we're sourcing more than 15% of our sales through this network of BDMs, up from less than 10% when we IPO'd, which I think is a good proof point that our investments within that area is paying off.
If you look at the scale of this model, we have, in addition to our team of business development managers, more than 2,000 people working with AutoStore from our network of 22 partners. All of these individuals are trained through our AutoStore Academy, where you need to be certified for a number of e-learnings, classroom trainings, and practical training across all aspects of the business, from designing and simulating the project to installation, commissioning, and service and support. The model is designed so that it's a multi-distribution model where no partners has exclusivity in any given area. We've structured it so that we have a mix of global partners with global reach and regional partners trying really to cover as big portion of the market as possible.
At the same time, we want to have a healthy competitive dynamic while we're maintaining it attractive to be an AutoStore partner. When we are adding partners, we do that either from a capacity standpoint or because we see the need to increase access into a certain segment, a certain geography, or just generally because we see so strong demand. Since the IPO, we've signed up three new partners in StrongPoint, Fives, and now also DLS in APAC, which will help drive market access and capacity into what's gonna be a growing region for us. In addition to that, we've expanded the distribution rights for Element, who's gone from being a regional European partner to a global partner. We've also done that with Smartlog, who will now also focus on AutoStore in South America.
If you look at their own presence in this, we continue to add more business development managers in markets where we believe that they can make a real difference and create incremental opportunities on top of the partner network. During 2021 and to today, we have doubled our BDM capacity globally with new additions in U.S., Europe, and in APAC. I think from the first slide that I show, this is paying off. In APAC, which is a high-growth market for us, we have now also established an office in Singapore, which in addition to our presence in Japan and Korea, where we also continue to invest. Going forward, we will continue to build more BD capacity and add more partners as needed.
We are operating in a market with so much growth opportunity, and the go-to-market model that we've built is a huge advantage when it comes to getting access to all of those opportunities and to actually be able to execute against those. I think this page here shows this dynamic quite nicely. If you look at the underlying growth in the pipeline, you'll see that our partners grow with us. Our long-term partners, they know the potential of our solution. They know how attractive it is from them financially, and we see them investing behind our product and driving growth with us as a result of that. Typically, it will take some time for new partners to ramp up.
You'll see here that the actions that we took during 2021 with adding even more partners because of the strong underlying demand that we saw is now starting to show potential with newer partners representing now 23% of the pipeline versus only 12% already back in 2020. How are we able to make this work as efficiently and as profitable as we're actually doing? It all really starts with our highly standardized and modular solution, which we've talked about a few times today because it is important.
Having been able to do that, we are able to drive high margins because of the standardization, and the modularity point of it gives our solution a huge flexibility when it comes to our end customers and the fact that it can work across all these different end markets and across all these different types of solutions. As we've talked about today, we have a very strong value proposition for our customers, which together with the growing installed base, creates a strong market pull for our solution. On top of that, our model with both partners and BDMs create a strong push into that market, which gives us access to more and more opportunities. This model here is not only profitable for us. Our partners are highly incentivized and make strong margins selling AutoStore, and our end customers are seeing high ROI and short payback times.
I think we're in what you could call a win-win-win situation, which enables us to continue to grow and continue to get focus. We now have almost 1,000 installations in more than 40 countries, and we have a high repeat purchase rate among our customers. Actually, around 50% of our revenues is coming from our existing customers, which I think is a strong testament of what we're doing for those customers. All in all, I think I'll say that we have the right product and the right model to continue to drive strong, profitable growth for really decades to come in what is a significantly under-penetrated market.
To end this section, I would like to play a movie that shows how ourselves and our partner Bastian Solutions has helped PUMA meet some of the challenges that they are faced with and what investing in automation and AutoStore has done for them.
In 2019, we worked with PUMA to look at their long-term growth strategy and realized that we were gonna be running out of space and capacity in our existing distribution centers out in Torrance. The business case was really developed for PUMA's long-term growth.
Our hesitancy with automation the first time is the fact that we knew that we had to make sure that our volumes that we were gonna do in the future were consistent with what the automation can support, so that was very important to us. The second one was, making sure that our people were comfortable to be able to use the AutoStore and technology. Those were probably the two major items that we spent the most amount of energy on.
I think when we looked at the new distribution center in Indianapolis, we had about a 5-year horizon when we were looking at the investment and the ROI. I think we've already seen in the last 12 months really that payoff.
The AutoStore solution has allowed us to ship out more e-commerce orders, this past November than we have in the history of the account. We also were able to do it with less labor and less training. The AutoStore solution also allows, with the goods-to-person port, for very quick training so that we have less errors and better accuracy on our orders.
I think in our business it's innovate or die. It sounds brutal, but I really feel like you're either moving forward and you're using technology and automation and innovation to get better or you're going backwards. AutoStore gave us that ability to do exactly that. Get faster and more efficient using the Black Line and automation. I think if you're a CEO and you're not looking at those advantages, I think you're crazy.
I'm not sure if I can end the section in any better way, so I'll just hand the word back to you, Hiva.
Thank you, Mats. Yeah. Now moving on to another very important topic, especially these days, is supply chain resilience. I would like to introduce you to our newest and freshest member of the executive management team, Israel Losada. He is our COO, and he has a very simple philosophy. If we can sell it, we can deliver it. There are no excuses. With that, Israel, the floor is yours.
Thank you for a very good introduction. My name is Israel Losada, and I'm AutoStore's new Chief Operating Officer. What I'm gonna be sharing with you today is what we are doing in operations and supply chain to keep up with the great job that our sales and R&D are doing. What I wanted to start by saying is that it is the standardization and, you know, modularity of our system that allows us to create our efficient supply chain. I know you heard it a number of times already during the session, but I wanted to make sure that I would emphasize that because the rest of the presentation, in a way, is linked to that concept. Our strategy is, if you want, relatively simple.
We want to make sure that our products are available at the right time for the right price. That seems like a pretty straightforward thing to say, but in these days with the current situation, what it really means is striking a very fine balance between taking short-term actions to deliver on the demand that we have today and also taking action on securing the further growth that we are preparing ourselves for. With that in mind, allow me to take you through the process that we are following, and we are starting with making our product available.
As I was mentioning before, and sorry, because apparently I didn't click on time, so I've gone through this slide, but allow me to take you to the first portion of it, which is availability. The first thing that I would like to say is that for us, it all starts with planning. What we have done is we have developed a rather comprehensive system and process to make sure that we are able to capture the demand from orders, plus the whole pipeline that Mats has been talking about, and aggregate it in real time and share that information regularly with our suppliers. The purpose of this, of course, is to make sure that our suppliers are ready. They're taking the necessary actions themselves.
They secure raw material, they secure production capacity, so they are able to deliver products to us when we need them. I believe it's also relevant to mention that the company took very decisive action in 2020 when they decided we see that there is a shortage of components in the market, and henceforward we're gonna be looking at the demand 12 months ahead, and we're gonna be buying components and parts that we're gonna need during these 12 months, and we're gonna keep it in our warehouses. We are less subject to these shortages that are happening out there. This is, of course, costing us money. It's working capital. But I can tell you, it is probably the best insurance policy we could ever buy, and at the end of the day, it's kept our lines running when others didn't.
The next thing that I wanted to talk about is strategic thinking. What we are doing is we are engaging with suppliers and distributors, especially of electronic components, at the very early stage in the design process. The idea is to make sure that the components that our R&D team is choosing for next designs are at the right place in the life cycle. What we want to avoid is spending months or years developing a very advanced and really, you know, cutting-edge technology only to realize when we put it out in the market that we cannot supply all the parts that we need to actually manufacture them. I think some of you were probably exposed to the 2017, 2018, and 2019 shortages in electronic components. Today, we're talking about semiconductors, but a few years ago, we were talking about passives.
It was all about trying to get a hold of multilayer ceramic capacitors. What we learned at the time is if you want to make sure that those components are going to be available to you in the future, you're gonna have to be designing with sizes smaller that may be 0402 or 02001. All that knowledge that we are acquiring by these partnerships with manufacturers and distributors are enabling us to hit the market and not have to stop due to lack of components. The last topic that I wanted to bring up to your attention is the spread or the increase in our footprint when it comes to suppliers.
We need more suppliers, not only because we are growing, but also because we need to create redundancies, and we need to create competition between our suppliers. We need to avoid any sort of resemblance of monopoly. A very good example of this is what we have done with the suppliers of grid, of aluminum extrusion parts. If we look back at 2019, we had three factories supporting us in two countries and one continent. As of today in 2022, we already have 11 factories supplying parts to us, and by the end of the year, it will be 14 in nine different countries in two separate continents, and this is only the beginning. Now that I told you about making sure that the parts are available, we need to make sure that they are available at the right time.
The first concept that I would like to bring is regionalization. We're trying to stay close to our customers. We're trying to stay close to our suppliers. We're trying to make sure that we shorten these supply chain paths as much as we possibly can. There is another very interesting topic, and I think I will try to answer on the fly some of the question that was brought up earlier today, is what are we doing to make sure that we have the right footprint, and do we have enough capacity? We are constantly monitoring the demand that we have versus the capacity that we have. On that note, I would like to share with you that we are expanding our facility in Poland. We're taking it from 6,000 square meters to more than 33,000 square meters.
That will be completed during this year. On top of that, we are in the process of looking for a suitable location for a new facility in Asia Pacific. It's gonna be either a brownfield or a greenfield operation, depending on what we think it's suitable for us. We've been looking in three different countries. We have shortened the list now to two, and we are in contacts with the governments to understand what sort of benefits and incentives we could get. We are visiting sites as early as June and early July, and the decision will be made public very soon. Other important factor here is our ability to move goods around the world.
One of the advantages of the extension in the reach and the sort of globalization of our company is that now we get access to the top logistics players in the world, which we couldn't do, let's say, five, six years ago when we were much smaller. It's not only getting access to them, it's also getting a higher priority versus other companies. With this level of business, with the fact that we are growing at the pace at which we are growing, the fact that we have more suppliers, the fact that we have more partners and we have to ship more things around, is giving us a little bit of a higher point when it comes to getting our parts shipped around. This is not trivial.
I'm sure that you have all heard about the great percentage of container carriers that are stuck on the shores of China, and how difficult it is to get a container today. The carriers being at the shores, but the containers not being able to be unloaded or offloaded from ships. That little difference between being number five and being number three is the difference between getting your goods on time and not. I'm very happy to say that with this growth that we are experiencing, we are also getting access to players that we couldn't before in conditions that we couldn't get before, and I'll try to talk a little bit more about this. How good would all this be if we were not able to fill products at the right price?
It's absolutely critical to us. You heard me talking about the fact that we are getting to become a bigger company. As in many things in life, size matters, so the bigger we are, we are also able to do bulk purchases that we couldn't do before. We also get access to suppliers that previously might have not been interested in doing business with us because we were not big enough. We are getting more bargaining power, and this is something that we notice very clearly when we now approach new suppliers. We realize that our ability to agree on favorable terms for us is bigger than it was, let's say, two years ago. Another important topic to talk about is the optimization of our footprint.
One part of this conversation was about making sure that we got the parts available and that we get them available on time. It is important to make sure that the setup that we have also delivers the great value or the highest possible value for our customers, but also for you guys, our shareholders. I like to say that the evaluation that we have done it's been a rather thorough analysis, and that's one of the reasons why we have decided to start setting up a facility in APAC, is that the landed cost of products being shipped from Asia-Pacific to, for example, North America, it's a better landed cost than if we were manufacturing in North America itself. In a way, this speaks about the constant search for ways to reduce cost.
This ingrained continuous improvement culture that we have in the company is what allows us to try and push for generations on savings that we can then pass on to our customers, but also to remain competitive in a very competitive market. It goes without saying that we are constantly monitoring the market. We are constantly looking at what market prices are for the parts that we buy. We are constantly benchmarking those prices. I guess the key word that I would like to leave you with is partnerships. We are always trying to look for situations with our supply partners that will result in win-wins, and this is important when, in cases like now, demand greatly exceeds supply. Those partnerships are the one that will get you out of trouble, securing that you get the parts while other people might not.
In closing, I think a lot of people in AutoStore and in our partners has put a lot of work in the recent months to make sure that parts were delivered on time for the right price to our customers. We are quite proud of the fact that in all this time we have not had to stop the lines, not once. We have started to see an improvement in our lead times, bringing it back to what it was before all this crisis situation. What we are receiving is also very clear, positive feedback from our customers, from our partners, and from our suppliers. I'm very happy to say that we are looking at the future with considerable optimism. That, I guess, is the message that I would like to leave you with. Thank you very much. Hiva?
Thank you, Israel. You know, you can actually stay, Israel, 'cause we have time for Q&A, and I'd like to invite Jenny and Mats up. We have time for a few questions, and since we have given the audience here in the room a lot of attention, I'm just gonna quickly check if our webcast audience are with us still and if there are any questions here. It doesn't seem like it yet. Are there any questions here in the room? If so, please raise your hand. We have a gentleman here. Please.
Thank you. Can you just remind us how many partners we have now in Asia, given that we're moving into a sort of local manufacturing and assembly? Is there anything fundamentally different about the partnership strategy in Asia in terms of how, you know, how they operate or in terms of the actual agreements that you're able to get into? Thank you.
It's the same standard distribution contracts as we have globally, which is an important principle. In terms of number of partners, in addition to the global ones that also has presence there, we have Okamura in Japan together with TKSL. We also have Asetec, Samsung, DLS in Korea.
Thank you.
Let's see. We have. I'm noting two here, so maybe we can take.
To add one.
Sorry.
LG CNS as well. Thank you.
We'll take Eirik afterwards.
Hi. Thank you. This one is for Israel. With regards to the supply chain issues and the chip shortages, how much impact of that have you seen to revenue growth? I think earlier it was mentioned that some of the component or some of the parts have been redesigned, so how do you ensure that the quality remains the same? Thank you.
It's a very good question, actually. I guess, let me try to answer this in parts. The first part would be preventing problems, and that would go back to the comments that I've made of the strategic alliances with distributors and manufacturers to make sure that the choices that we make early on, when we are designing the product are the right ones.
When it comes to the second part, making sure that we are able to, let's just call it firefighting, meaning when everybody's fighting for the same parts, then I have to go back to the last point that I made, which is the partnerships that we have established, and the very decisive action that the company took and that continue taking in, basically buying inventory and making sure that we have that buffer to keep the lines running. We have raw materials, but we also have finished goods. What we see also is that strategy is paying off because we also start to see the lead times to our customers going down.
Thank you.
You're welcome.
One up there. Great. Eirik here.
Oh, sorry.
Can you just raise your hand again? There we go. We have time for him. There you go.
Perfect. Thank you. Mats, a quick one for you. Can you just talk a bit about how you balance the growth opportunities in the partner portfolio? If I remember correctly from the IPO, you know, you had three partners that were, you know, in some very sizable. How do you work with kind of the tail of the partner network to make AutoStore a meaningful share of their revenues?
Yeah. It's a good question. As I was showing, the share that these partners has of total pipeline is now bigger than what it was some time back. We have our playbook on how we work with these partners. First of all, they go through the AutoStore Academy process, which enables them to identify, sell, and execute AutoStore projects. That obviously has some lead time. In addition to that, we have a partner management organization where we discuss growth strategy, what initiatives needs to take place, what type of marketing and sales efforts do you need to put in place, how do you build the right adjacent technology around the AutoStore system, et cetera.
That in addition to the BDM organization, we've obviously also invested a lot in that part of the organization so that we can have these types of discussions and ensure that we get the right priority.
Thanks.
We actually do have a question from the web audience, and Mats, I think this is for you. THG have been vocal about their partnership with AutoStore first. Why hasn't this partnership been featured today? Is this not no longer an opportunity?
THG is an end customer of ours which has their AutoStore system in use. They have created a very nice solution around their Voyager platform, and we've always had and continue to have an open interface mentality. We are creating standard APIs that enables our end customers to use whatever WMS system is available out there. That's what THG has done, created a nice solution that they offer to the market.
Thank you. That's all we have time for this Q&A. Thank you, all three of you. Yeah, thank you. We've talked about our strategy and growth agenda, and as you know, high growth, high margins, and high ambitions for the future are key characteristics for AutoStore's financials. To speak more about that topic is our Chief Financial Officer, Bent Skisaker. The floor is yours.
Thank you. I will now summarize this CMD and take all the great presentations from my colleagues and from the CEO of Rohlik Group, and I'll summarize that into our superior financial profile of
Strong growth, high margins, which is enabled by our unique business model. Look at this. We are incredibly proud our performance so far, but we are even more excited about the growth to come. As shown here on the left, we have a long track record of high growth. Since 2010, we have delivered over 50% annual revenue growth on average, and we really continue to benefit from a huge under-penetrated market with high growth rates, which is reflected in the accelerated growth we saw last year. We had almost 80% growth in 2021, and we see a growth in the range of 70%-80% this year.
As you see on the graph to the right, we have started the growth this year with a very strong performance, almost doubling our Q1 revenues compared to last year. As we will see on the next slide when I come there, we have high visibility on revenue growth, thanks to our record high order intake and backlog and our growing pipeline. Therefore, we reaffirm our 2022 revenue guidance of $550 million-$600 million and also our medium-term revenue guiding. Here we see that the strong order intake continued in the first quarter 2022. To the left here, we see a growth in last twelve months' order intake of 112% year-on-year. Very much driven by the advantages of our superior system, our unique business model, and massive under-penetration of warehouse automation.
This strong order intake has driven a substantial increase in our backlog, which is up by 129% compared to last year and is now at $487 million. In addition, to support high growth for the medium term and for many years to come, we have a massive growing pipeline today at $4.8 billion, which Mats already has talked about, which represents a year-over-year growth of 64%. Many of you probably remember the pipeline of $3.4 billion from the IPO process, so it has actually grown by 41% in only half a year. As you know, our pipeline is incredibly diverse, and as described earlier in the presentation, the pipeline is across a large number of customers in a variety of segments and geographies.
I think it's worth noting again that the pipeline only includes tangible leads identified by our business development managers and our partners. The leads are currently progressing through the sales funnel and are expected to materialize over the next 2-3 years. Our pipeline is not built up by a lot of speculative opportunities. As our backlog is making us confident achieving $550 million-$600 million this year, the high growth in our pipeline gives us good confidence on our medium-term revenue guiding. Not only are we delivering high revenue growth, as you have heard earlier today, our business model based on modularity and standardization and working with partners in an efficient, easily scalable go-to-market model are important drivers of a consistent high EBITDA margin. We have historically consistently delivered EBITDA margins of around 50%.
Recent increasing raw material prices, especially on aluminum, have put some pressure on these margins in the recent quarters. This pressure we see will continue in the short run. However, one of our key takeaways from today is that the price increase combined with the aluminum surcharge are expected to drive margins back to historical adjusted margins levels from the start of 2023. In Q1 2021 margin is temporarily impacted as we executed on the backlog secured in 2021 at lower prices. This temporary impact we also will see in Q2 and Q3. The price increase introduced in Q4 2021 and the aluminum surcharge we introduced now in the first quarter are expected to have positive impacts as projects move from backlog into realized revenues in Q4 this year and with full effects going into 2023.
Importantly, we see continued high demand, which demonstrates our competitiveness and our ability to take necessary actions when required. As you see here to your left, as also Karl Johan mentioned in his introduction, if we pro forma for the full effect of the aluminum surcharge and the general price increase, Q1 2022 adjusted EBITDA margins would have been around 50%, which is around 6 percentage points higher than the 44% adjusted EBITDA margin we reported today. To repeat, unless a significant unforeseen circumstances emerge, we will be back around historical margin levels from Q1 2023. Thanks to our robust adjusted EBITDA and moderate CapEx requirements due to our asset light assembly model, we continue to see healthy growth also in cash conversion levels, with cash conversion in line with historical levels as you see here on the right.
Building on from the previous page, we can see here on upper left that on a last 12 months basis, we are still at approximately 80% cash conversion. In terms of net working capital, as Israel described earlier today, we just now have a higher level of operational assets and inventory than we have historically to ensure good execution on delivering. Our proactive approach to manage our supply chains has enabled us to execute delivery of our products also in these challenging times. This proactive approach influences our net working capital somewhat. As you see on the upper right here, last year's Q3 and Q4 net working capital were influenced by large amount of payables related to the IPO.
In Q1 this year, we also are influenced by high level of trade receivables as a large proportion of the sales were delivered towards the end of the latter part of the quarter. We see, in other words, that the net working capital is varying. It's bumpy from quarter to quarter, but over time, we still expect our net working capital level to be around 15% of last twelve months revenues. Maybe a couple of percentage points higher in the short run due to investments we do in inventory. Since we have more large single sales to large projects, there will still be fluctuations in net working capital also out of this reason from quarter to quarter. When it comes to CapEx, we invest in growth and especially within product development.
The investments are around 8%-10% of revenues, and approx 70%-80% of this is related to product development. The 10% level we see now is higher than normal as we have accelerated investments within frozen and MFC as both Mats and Carlos has talked about earlier today. I also want to take this opportunity to share an update on two other important topics, our capital structure and adjustment items to EBITDA. For our debt leverage, recall that we as part of the IPO process reduced our debt. The leverage has come further down now, and today we are at 1.7x adjusted EBITDA.
The robust capital structure with a moderate leverage, sound cash position, and a revolving credit facility of $150 million, which is unused, and a cash-generating business gives us a very flexible financial position. In this respect, I want to just make a comment on a concern which I got some feedback of today that some reacted on the cash, the negative cash development from Q4 to now to Q1. That was an expected reduction in cash, most of it, since there were a lot of payables related to the IPO and also to the execution of the share options. All that were in the balance sheet, of course, in Q4 and also explained.
It seems that there has been at least some who hasn't remembered that, but the reduction in cash is related to that and is of course one-off in nature. With respect to adjustments to the EBITDA, last year was an exceptional year. A large proportion of the adjustments were related, as I said, to expenses arising from going from being a private equity company into being a listed company. Coming into the first quarter 2022, what's clear is that the only noteworthy adjustment now relates to the litigation costs pertaining to the ongoing Ocado litigation that Jenny spoke about earlier.
Beyond litigation cost in the short term and a more moderate level of option costs beyond that, the adjustment items we saw in 2021 will cease in 2022. To my last slide, we want to leave with the same notes that Karl Johan mentioned in the beginning today. We are exceptionally proud of our journey so far, but we are even more excited about the future. From our perspective, we see that this is only the beginning of our growth journey, and we are very confident when we reiterate our increased guidance from February this year when we released our Q4 report, both for 2022 and also for the medium term. With that, the word to Hiva.
Thank you. Thank you, Bent. You can stay. Then I would like to invite all of our members of the executive team back up on the stage for the final Q&A. Now you have the opportunity to ask questions to the whole team. Please raise your hand in the audience here if you have any questions, and we'll also take questions from our web audience. Let's see. Are there any questions? Yes, there are from our usual suspects. Let's start here on easily and convenient.
Thank you. Two quick questions. One was for Bent. Thank you very much for the clarification on the trade payables and all those murky issues this morning. Just to put the issue to bed, it is fair for us to assume that that cash movement that we saw in the fourth quarter from payables and one other line item, but basically is vastly the vast majority of it are the issues that you identified in the fourth quarter, i.e., the one-time items, tax, option expense, et cetera. That from a quantitative standpoint.
Yeah
that is the vast majority of the number. Is that fair for us to assume?
That's fair to say, yes.
Okay.
Yeah.
Thank you. Second one, I know we've been here before, and I apologize, but I'm gonna, you know, give it a go again. $34 million of litigation costs is quite an impressive number. If I remember rightly, three years ago or something, it was $2 million. We are really, really spiking here. You say that you're not a litigation company. This is a lot of money on litigation. How long do we carry on with this? What prevents, how would I put it, more moderate outcomes in future? How do we get this resolved?
I can start, and then maybe someone else can fill in. There was a high level of activity in the first quarter and also into the second quarter. In the first quarter and then in the second quarter, we will see still some noticeable litigation costs. At least according to plan, that will go down to more moderate levels in the second half. As we said before, when it comes to this Ocado litigation case, it's a bit difficult to estimate the exact development of it. What I say now is our current understanding of it.
Jenny, do you want to continue?
Yes. I think as we said, we're not a litigation company, and we will always fully engage in any reasonable settlement discussion.
Is anything moving forward, or are we still full on in ITC and?
The litigation is as it is now. As I said, we have appealed the ITC decision. We are expecting a decision in U.K. in Q3, and as the situation is now, the litigation is continuing.
Understood.
When you look at that, you asked for how long. Our offensive is in U.K., and then there is Ocado has a case in U.S. that will come up late 2023. I think that's the two major parts that we will see in the future.
Understood. Thank you.
Why don't we smoothly just move over, and we'll make sure that we take the rest of your questions.
Thank you. It's Martin again from Citi. Just a question on the Black Line, because obviously when Ocado is litigating against you, it's to do with Black Line. You did give us a mix, I think it was in Q4 end of last year as to how big Black Line was as a percentage of your opportunity. If you could just update us on that, because it seems just from the emphasis that it's maybe not as big now as the outlook as it was in the past, and maybe that's because of the R5. Just to understand sort of, you know, where are we with Black Line? Is it as big as it used to be, if you like?
Yeah. We see a decreasing trend. Even before we introduced the R5 Plus, Black Line was representing roughly 10%. Thus, we see that Red Line in combination with Router meets the majority of demand in the market. With the R5 Plus, we've seen some prior Black Line demand also shifting over to R5 Plus because of the positioning strategy that we've always had with Black Line being the high ROI product also for the end customer. What we've seen so far is that, yes, that's the case. We're seeing Black Line reduce even more.
I think Katinka here can continue.
Thank you. Just a question from my side on wage inflation. You mentioned that your customers are choosing your solution because they are seeing wage inflation, but what are you seeing, yourself and do you see any risk to your margin because of that?
We of course also see that there is some inflationary development in, especially in some countries. The increase in expense we see from that is well within the range of what we take out in operational leverage.
Thank you.
I think just behind there.
Hi, yeah, Sasha Karim from Inflection Point Investments. My question is, over the next decade I'm guessing some competitors will look at those margins that you're making, 50% EBITDA, and think, "Maybe I could offer a competitive product that's almost as good and slightly lower price, and, you know, there's plenty of margin to go for." My question is: what allows you to keep earning the 50% margins, you know, in the long term? Is it? I'm guessing it's probably more down to the software than the standardization, which looks more copyable. The software seems like it's harder to copy. But what is it about the software? 'Cause there are lots of other companies that do optimization software, routing software in different aspects of the world.
What is it about yours that's so difficult for others to copy?
I can just start and then we can add on. Your question in this connection is a question we have been asked for the last seven, eight years, and we still see that we are able to continue with strong margins. We grow strongly, we get more operational leverage, and we have an even stronger position today than we had those years. Of course, software is probably the most important part there, really. One of the most important barriers to entry is to stay in front technologically, and software is key in that connection. I mean, you have looked at the development of our product, higher throughput, higher uptime. There is a different level on that product today than it was 10 years ago, for instance, and that will continue also in future. Maybe you will add more, Carlos?
Yes. I think when you say software, it is definitely a key barrier for entry. I think our install base represents a massive opportunity for us to further improve and optimize the system. We have close to 1,000 systems out there. We are gathering a lot of good information on how they operate, so we can further improve and optimize our system. Now, if you bring into that mix our capabilities into inventory management, we can then further optimize even more how we drive fulfillment. I think you are right. I think there might be eventually other competitors into Cube Storage, but we will maintain our position by being closer to all these customers that have trusted on us and that are helping us to develop the technology further.
We can also add that we have a go-to-market model where the companies that normally make these type of products, they are all partners and they make good margins. That's also an important barrier to entry in this connection.
Should we just pass the mic to Eirik, and then I'd like to take a couple of questions from the web audience?
Thank you. Eirik again. More conceptual question on the business model long term. I know we've discussed it previously, but have you considered maybe for the smaller end customer some sort of as a service model instead of the upfront CapEx model? Also a second question on that. Is it possible for your partners today to structure it as a service model, or is that not within the scope of the partnership structure?
The answer is yes. We are piloting solutions for smaller e-commerce players where the payment model is recurring. You pay per pick instead of doing the upfront CapEx and paying the software license. We're able to do that because of the standardization and the fact that we've built a software layer on top that automatically integrates to the regular e-commerce platforms like Shopify, WooCommerce, et cetera, et cetera. We're also looking and being open to doing these types of revenue models outside of small e-com as well, because we have the software that enables the inventory visibility that we need to drive such models. Our partners can also structure such models because we have the components to do so.
Perfect. Thank you.
Okay, I'll read the question from the web audience, and the first one goes: What do you mean by, "We see significant opportunities for growth acceleration going forward"? Q1 2022 results press release is what they're referring to. Could your 40% midterm guidance be considered as a floor, including a decent safety margin?
Yeah. Look, I think we've been able to deliver 80% last year, 70%-80% this year. We've guided on a 40% growth, which I think is really, really strong. We're seeing the pipeline to be able to support that. Isak has presented what we're doing on the supply chain that's able to support that. That coupled with the fact that we have such a big market in front of us and our product positioning within that market, of course makes us feel positive about the future potential of this business. To reiterate, 40% from this level is very strong growth, and that would mean that we would be taking massive shares from other technologies in the market.
Thank you, Mats. Another question from the web. Could you please give more color on your EBITDA margin, what is fair to expect for 2022? I think, Bent, this is for you.
Yeah. As I said in my wrap-up presentation is that, in the next two quarters, we will have pretty much the same situation as in the first quarter when it comes to supply chain cost. There may be some operational leverage, but pretty much on the same level when it comes to margins, as in the first quarter. Then as I also said, when we come to the fourth quarter, we will have the effect of the price increase we introduced in December 2021. Then the full effect of both the price increase and the surcharge we will have in the first quarter of 2023.
That concludes the questions so far from the web. We have time for a couple of more questions from our audience in the room. Any questions, please raise your hand. There we go. A question. Two questions. Perfect.
I will continue on grocery versus non-grocery. Apologies. Within this 40% annual growth, what would be the split between your currently core existing business on non-food, online order fulfillment and food? Can you give us any sort of insights into profitability of grocery versus non-grocery for you? Thank you very much.
I can take that. If you take that 40%, look, today, a big majority is non-grocery, as Mike presented in his presentation. We believe that that segment of the market will grow faster than other segments of the market, and hence also our revenues will grow faster. We haven't guided or have set any specific targets, industry versus others, so it's gonna give the same level of profitability on the five modules that Carlos talked about. In addition to those five modules, we're gonna be able to push our WMS software, where we on top of that then will add a recurring revenue portion, which will make it a relative.
As you scale with additional systems, you're of course gonna gain scale benefits from process standardization, technology standardization across your network that kind of enables economies of scale on both the operation but also spare parts. We're able to shift robots across, et cetera. I think also the fact that we have our software in, which will be even more important when we add the WMS, just further strengthen that lock-in. What we're seeing is that we haven't had customers coming in replacing AutoStore with other types of technology, and what we see is that when they have seen the operational benefits of AutoStore, they continue to buy more. Around 25% of our revenues is existing customers coming in buying new installations with us.
20% of revenues is extensions. All in all, actually 50% of our revenues comes from existing customers, which really shows that you can call it whatever it is, stickiness or a lock-in effect.
Thank you. That's all we had time for Q&A today. I'd like to ask our CEO and President, Karl Johan Lier, to stay on stage while the rest of you can leave the stage. For your closing remarks, Karl Johan Lier.
Thank you, Hiva. It has indeed been a great day for us. Thank you all for joining us. I hope that you found the time together with the whole team valuable. AutoStore continues to be a high growth, high margin business and a pure-play investment leverage to global mega trends within e-commerce and automation. Today, you have heard us talk about the record pipeline, our focused R&D approach, further developing our software offering, and expanding our footprint in different geographies, especially in APAC. While we are currently operating in a tight market, we expect the introduced price increase and aluminum surcharge combined to lift the margins to our historical levels going into 2023.
In addition, the record high order backlog provides significant revenue visibility, and we are confident in our 2022 revenue guidance of $550 million-$600 million and also our medium-term growth aspirations. As I always say, we are just in the beginning of the growth journey. The best is yet to come. Thank you very much.
Wow, what a day. I really hope, or we really hope, that you've enjoyed the time with us, that you've learned more about AutoStore, and I also hope that for those of you who are here, that you can join us for some refreshments and some mingle outside of the auditorium, and not to forget to look at our robots and our demo grid. On behalf of the whole executive team, I would like to thank you for the time you've spent with us, and we truly look forward to seeing you all soon again. Thank you.